[Federal Register Volume 79, Number 46 (Monday, March 10, 2014)]
[Notices]
[Pages 13366-13368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-05055]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71646; File No. SR-OCC-2014-03]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change to Comply With Recently
Adopted Commodity Futures Trading Commission Requirements for
Derivatives Clearing Organizations That Accept Deposits of Futures
Customer Funds
March 4, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on February 19, 2014, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change described in Items I and II below, which Items
have been prepared primarily by OCC. OCC filed the proposed rule change
pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(4)(ii)
\4\ thereunder, so that the proposal was effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4)(ii).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
This proposed rule change by OCC would amend OCC's By-Laws and
Rules to allow OCC to comply with recently adopted Commodity Futures
Trading Commission (``CFTC'') requirements for derivatives clearing
organizations (``DCOs''), such as OCC, that accept deposits of futures
customer funds from futures commission merchants (``FCMs'').
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. OCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
OCC is proposing to modify its rules to allow it to comply with new
CFTC requirements imposed on depositories that accept deposits of
futures customer funds from FCMs. Recent amendments to CFTC Regulation
Sec. 1.20 \5\ require that FCMs only deposit futures customer funds
with depositories that agree to grant the CFTC's Division of Swap
Dealer and Intermediary Oversight (``DSIO'') and the CFTC's Division of
Clearing and Risk, as well as representatives of the FCM's designated
self-regulatory organization, certain access and examination rights
(``CFTC Access and Examination Rights'').\6\ OCC, as a CFTC-registered
DCO, functions as a depository with respect to any futures customer
funds deposited by clearing members that are FCMs. Consequently, for
these FCM clearing members to continue to use OCC as their DCO, OCC
must agree to comply with the CFTC Access and Examination Rights.
Pursuant to CFTC Regulation Sec. 1.20(d)(1),\7\ OCC and the clearing
member may make this agreement either by providing a written
acknowledgment
[[Page 13367]]
letter to the clearing member with respect to each segregated futures
account and segregated futures professional account containing futures
customer funds or by adopting rules that provide for the segregation of
futures customer funds in accordance with the Commodity Exchange Act
and all relevant CFTC regulations and orders promulgated thereunder.
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\5\ 17 CFR 1.20.
\6\ CFTC Regulation Sec. 1.20(d)(3) (17 CFR 1.20(d)(3)) also
provides that FCMs may only deposit futures customer funds with
depositories that agree to provide the director of the DSIO with
``direct, read-only electronic access to transaction and account
balance information'' for the futures customer accounts. Based on
discussions with staff from the CFTC's Division of Clearing and Risk
on December 16, 2013 and subsequently confirmed via email, it is
OCC's understanding that, as a DCO that serves as a depository with
respect to deposits of futures customer funds by its clearing
members that are FCMs, it will not be required to provide this
direct electronic access, because the CFTC did not intend for the
requirement set forth in Sec. 1.20(d)(3) to apply to a DCO that has
submitted to the CFTC rules that provide for the segregation of
customer funds in accordance with all relevant provisions of the
Commodity Exchange Act and the rules and orders promulgated
thereunder. Consequently, OCC is not including this direct
electronic access requirement among the other CFTC Access and
Examination Rights addressed in this Rule Change.
\7\ 17 CFR 1.20(d)(1).
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In Sections 3(f) and 3(j) of Article VI of OCC's By-Laws, OCC
already states that it agrees to comply with applicable regulations of
the CFTC pertaining to the holding of segregated funds by clearing
organizations of contract markets with respect to its segregated
futures accounts and segregated futures professional accounts. OCC
proposes to amend the language in both provisions to incorporate OCC's
agreement to comply with the Commodity Exchange Act itself and all
applicable CFTC orders, and to more precisely conform to the exact
language requirements of CFTC Regulation Sec. 1.20(d)(1). In order to
provide certainty to its clearing members that are FCMs, OCC is
proposing to add Interpretation and Policy .10 to Section 3 of Article
VI of OCC's By-Laws,\8\ so that OCC also explicitly agrees to comply
with the CFTC Access and Examination Rights set forth in newly adopted
CFTC Regulation Sec. 1.20(d)(5) and (6) with respect to all segregated
futures accounts and segregated futures professional accounts.\9\
Additionally, Interpretation and Policy .10 will provide that all
clearing members that open segregated futures accounts or segregated
futures professional accounts have authorized and directed OCC's
compliance with the CFTC Access and Examination Rights without further
notice or consent. To this same end, OCC also proposes to amend
Interpretation and Policy .11 to OCC Rule 604 to clarify that any cash
deposited as margin in a segregated futures professional account will
be handled in the same manner as OCC currently handles cash deposited
as margin in a segregated futures account--i.e., if such funds are
invested, they will be invested in accordance with CFTC Regulations
Sec. Sec. 1.25, 1.26 and 1.27 and any other CFTC rules pertaining to a
DCO's investment of futures customer funds. Not previously mentioning
``segregated futures professional accounts'' alongside ``segregated
futures accounts'' in this Interpretation and Policy was an
unintentional oversight, and OCC proposes to make this change in the
interest of completeness--it does not reflect a change in policy
regarding its handling of futures customer funds deposited in
segregated futures professional accounts.
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\8\ OCC intends to publish an Information Memo to inform its
clearing members of the filing of this rule change.
\9\ 17 CFR 1.20(d)(5)-(6).
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2. Statutory Basis
OCC believes the proposed rule change is consistent with Section
17A(b)(3)(F) of the Act,\10\ and the rules and regulations thereunder,
including Rule 17Ad-22(d)(3),\11\ because it is intended to protect
investors and the public interest by ensuring OCC holds futures
customer funds in a manner that minimizes the risk of loss and delay in
access to such funds. As described above, the proposed rule change is
designed to address OCC's handling of futures customer funds related to
its performance of clearing services for products that are subject to
the jurisdiction of the CFTC. The proposed change will ensure that OCC
holds futures customers funds in accordance with new requirements
promulgated by the CFTC designed to protect futures customers and
provide for safer futures markets. The proposed change will not
adversely affect OCC's obligations with respect to the prompt and
accurate clearance and settlement of securities transactions. The
proposed rule change is not inconsistent with any rules of OCC,
including any other rules proposed to be amended.
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
\11\ 17 CFR 240.17Ad-22(d)(3).
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(B) Clearing Agency's Statement on Burden on Competition
OCC does not believe that the proposed rule change would impose any
burden on competition that is not necessary or appropriate in
furtherance of the Act \12\ because it relates solely to OCC's
activities relating to the clearing of commodity futures products
subject to the exclusive jurisdiction of the CFTC and therefore would
not have any impact or impose any burden on competition in securities
markets or any other market governed by the Act.
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\12\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received from Members, Participants or Others
Written comments on the proposed rule change were not and are not
intended to be solicited with respect to the proposed rule change and
none have been received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change primarily affects the clearing
operations of OCC with respect to products that are not securities and
does not significantly affect any securities clearing operations of OCC
or any rights or obligations of OCC with respect to securities clearing
or persons using such securities-clearing service, the foregoing rule
change has become effective pursuant to Section 19(b)(3)(A) \13\ of the
Act and Rule 19b-4(f)(4)(ii) thereunder.\14\ At any time within 60 days
of the filing of such rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(4)(ii). OCC has indicated that it will
delay the implementation of the rule change until it is deemed
certified under CFTC Regulation Sec. 40.6.
\15\ 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml ); or
Send an email to [email protected]. Please include
File Number SR-OCC-2014-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2014-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the
[[Page 13368]]
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Section, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of OCC and on OCC's
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_14_03.pdf. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-OCC-2014-03 and should be submitted on or before March
31, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05055 Filed 3-7-14; 8:45 am]
BILLING CODE 8011-01-P